How to choose a retirement portfolio

The investment needs of your retirement portfolio will likely change over time. Proper retirement planning can help you choose a portfolio that best meets your objectives and risk tolerance.


What are the benefits of a retirement portfolio?

  • A retirement portfolio can create a more stable basis for your future. The returns from your retirement portfolio will supplement your Social Security benefits, and can possibly prevent you from having to live on a fixed income.
  • Because a retirement portfolio is diversified, it can protect you from market volatility by balancing different income classes. If one asset class drops in value, others can pick up the slack.

When should I start a retirement portfolio?

  • Early in your career as you begin saving for retirement, you may want to accumulate as high a balance as possible. A growth portfolio is a good option for investors with a longer term horizon.
  • As you mature in your career, a balanced portfolio can help retain a moderate amount of growth, but with less allocation towards stocks to help protect against market volatility.
  • Closer to and in retirement, an income portfolio can provide long-term sustainability with a greater allocation towards bonds.

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Types of retirement portfolios

There are three types of portfolios to consider when making decisions about your retirement savings. Each type has a different investing strategy based on your age and risk profile:


What is a growth portfolio?

A growth portfolio aims to increase the value of your retirement savings. It generally favors stocks, which – though potentially volatile – have historically delivered higher returns than bonds over long periods of time.

How to build a growth portfolio

If you’re looking to build a growth portfolio, consider the following strategies:

  • A wider range of investments, such as alternatives, can help reduce risk while adding more opportunities for growth. Unlike stocks, bonds or cash, alternative investments don’t fall into the “traditional investments” category. They behave differently, too. In a year when stocks are doing poorly, an alternative investment might be having a great year. We call that “negative correlation”: when one asset class goes up, the other goes down.
    By adding an alternative investment strategy to your retirement plan, you can help decrease the risk that your retirement savings are negatively impacted if one of the underlying assets doesn’t perform.

  • You don’t necessarily need to move away from stocks to help shrink risk. You could, for example, look to dividend-paying stocks or other growth strategies designed to offset volatility, while still being positioned to capture a portion of the market’s upside.

  • Alternative investments boomed because investors were seeking a high yield option other than equities. What other asset classes might enjoy growth because of unmet demand, demographic shifts, geopolitical change or economic headwinds?

What is a balanced portfolio?

A balanced portfolio seeks moderate levels of risk and return by investing in an even split of stocks and bonds. It then dials up or diversifies one or the other based on market conditions, risk tolerance or other factors.

How to build a balanced portfolio

If you’re looking to build a balanced portfolio, consider the following strategies:

  • when investing your hard-earned retirement savings. For example, while high yield bonds have more growth potential than investment grade bonds, they also may be more volatile. As you balance across asset classes, keep an eye toward their underlying risks.

  • Rather than build your own portfolio, you could invest in an all-in-one fund that seeks to balance your retirement investments for you, like a target date fund. Asset allocation and multi-asset funds also aim to provide an optimal balance of risk and return. Multi-asset funds invest flexibly by including multiple asset classes and are designed to fit any goal – be it growing wealth, generating income or protecting against capital loss.

What is an income portfolio?

An income portfolio is designed to offer long-term sustainability through a generally conservative strategy of bonds, mortgage-backed securities, stocks and other investments that pay interest or dividends. The goal is to generate an income stream that can compound and increase the value of your investment. It also seeks to provide protection that often appeals to pre-retirees.

How to build an income portfolio

If you’re looking to build an income portfolio, consider the following strategies:

  • U.S. Treasuries are still the foundation of many income portfolios, but the search for higher yields has many investors mixing in corporate and global bonds as well, including mortgage-backed securities or corporate bonds of lower credit quality.

  • An equity income fund might suit your needs. These funds seek to invest in stocks with a track record of paying out high or increasing dividends. As part of your retirement portfolio, high performing mutual funds and index funds are also an option to gain exposure to a varied basket of equities.

  • Real estate investment trusts (REITs) can be an efficient way to invest in a broad range of real estate holdings that pass through commercial rents. Their above-average dividends could enhance your retirement savings and supplement your retirement income.

  • Some ETFs produce steady income based on dividends, and they can invest in a wide variety of asset classes, geographical areas and business sectors. This can help diversify your portfolio as well.

How to maintain a retirement portfolio

Regardless of which portfolio strategy best suits your current investment needs, it’s important to check your asset allocation at least once per year to ensure you stay on track to meet your retirement income goals. Make this part of your personal finance routine.